SBA Review: What has been done and what is to be done for Europe’s SMEs

The “Small Business Act” for Europe (SBA) is a wide ranging set of pro-enterprise measures designed to make life easier for Small and Medium sized Enterprises (SMEs). The SBA seeks to promote entrepreneurship and anchor the “Think Small First” principle in law and policy making, thereby strengthening the competitiveness of European SMEs. Today’s SBA review presents an overview of the progress achieved in implementing the SBA, and sets out new actions to respond to challenges resulting from the economic crisis.

I. The SBA has been helping SMEs thrive since 2008: Achievements

Between 2008 and 2010, both the Commission and the Member States focused on implementing actions set out to alleviate administrative burdens, facilitate SMEs’ access to finance and support SMEs' access to markets.

All legislative initiatives foreseen by the SBA have been adopted, with the exception of the Regulation providing for a Statute for a European Private Company (SPE), still under discussion by the Council.

The Directive on e-invoicing is particularly helpful to small businesses, by making e-invoices equal to paper ones.

Businesses with a turnover of less than €2 million may benefit from an optional cash accounting scheme which makes it possible for them to delay accounting for VAT until they receive payment from their customers.

Public authorities are required to pay within 30 days as a security guarantee for SMEs.

Much more has been achieved in non legislative areas:

100 000 SMEs have benefited from the CIP financial instruments so far. A further 200 000 SMEs are expected to benefit by 2013. On average, each SME that is granted a guaranteed loan creates 1.2 jobs.

SMEs now experience lighter administrative burdens when accessing public procurement and have better opportunities for joint bidding.

To facilitate SMEs’ access to third-country markets, the Commission opened in November 2010 a EU SME Centre in China.

The Commission has put entrepreneurs and SMEs at the core of its innovation and research policy. Its aim is to remove the remaining barriers for entrepreneurs to "bring ideas to market".

II. Actions to boost SMEs

Despite these success stories much more needs to be done to help SMEs thrive and Member States must act as quickly and efficiently as possible in implementing the SBA.

1. Lighter administrative burdens

To facilitate the task of starting and running an enterprise the Commission will:

promote across the EU the application of the "only once" principle whereby public authorities and administrative bodies should refrain from requesting the same information, data, documents or certificates which have already been made available to them in the context of other procedures;

simplify the EU accounting framework by revising the basic requirements for annual and consolidated accounts (4th and 7th Directive) of limited liability companies.

in line with the Smart Regulation Communication, explore the possibility to set quantified targets for reducing "gold plating" by Member States.

Member States are invited to:

systematically assess the impact of legislation on SMEs using an ‘SME test’, while taking into account differences in the size of enterprises;

present at a defined moment of each year a forward planning of business related legislation that will enter into force over the next budgetary period;

the strict implementation of the “Think Small First” principle which implies a further simplification of the regulatory and administrative environment in which SMEs are operating.

2. SMEs need improved access to finances to invest and grow

To improve SMEs' access to funding, the Commission will:

aim to help SMEs through a strengthened loan guarantee schemes, that will support investments, growth, innovation and research;

make EU funding programmes more accessible to SMEs by further simplifying procedures;

present an action plan for improving SMEs’ access to finance, including access to venture capital markets, as well as targeted measures aimed at making investors more aware of the opportunities offered by SMEs;

explore options for setting up an intellectual property rights valorisation instrument at the European level, in particular to ease SMEs' access to the knowledge market.

Member States are invited to:

facilitate SMEs’ access to the Structural Funds by allowing SMEs to submit all data necessary for Structural Funds support only once;

develop "credit ombudsman"-type solutions to further facilitate the dialogue between SMEs and credit institutions;

ensure that inconsistencies in tax treatment do not lead to double taxation which wouldhamper cross-border venture capital investments;

create one-stop-shops where SMEs can apply for European, national and local grants.

3. Helping SMEs to face globalised markets

To improve SMEs’ access to China, the Commission opened an EU SME Centre in China in November 2010. More centres have been set up or will be set up in other fast growing countries. Exports represent a huge untapped market potential, in particular in the BRIC countries which it is estimated will account for 60% of world GDP by 2030. At present, these markets are only served by 7% to 10% of exporting EU SMEs.

To continue improving access to global markets for SMEs the Commission will:

present new proposals to support SMEs in markets outside the EU;

present a new strategy for globally competitive clusters and networks;

address problems of SMEs when they use the EU Trade Defence Instruments (TDI) by increasing information on and assistance in using them;

provide support to SME network-building, in accordance with Community State Aid and competition rules;

encourage SMEs to hire or buy in specialist expertise in order to help companies to grow, innovate and go international.

4. Internal market

Despite considerable progress in helping SMEs benefit from the Single Market, many remain cautious about engaging in cross-border activities for various reasons. Making cross-border payments is often perceived as costly and burdensome, as are the instruments available to resolve possible conflicts with customers, in particular in e-commerce. Accessing public procurement, standards and getting their interests better taken into account in the standardisation process is improving for SMEs but more action is needed.

To encourage cross-border activity the Commission will:

carry out an in-depth analysis of unfair commercial practices in the European Union and table a legislative proposal, if needed;

present a legislative proposal for a Common Consolidated Corporate Tax Base (CCCTB) propose a new VAT strategy aiming notably at reducing tax obstacles and administrative burdens for SMEs in the Single Market;;

facilitate cross-border debt recovery;

propose an instrument of European Contract Law;

undertake a revision of the European standardisation system in 2011 to ensure, that it addresses to the needs of SMEs

explain the rules on labelling of origin and inform SMEs about the means available to them to protect their legitimate interests.

Member States are invited to:

fully implement the ‘European Code of Best Practices facilitating SMEs’ access to public procurement’ ;

promote the online publication of free abstracts of European standards with a clear indication of changes made whenever standards are revised.

The Commission will, and Member States are invited to:

worktogether and strive to enhance electronic interoperability in the Internal Market, in particular delivering on the Single Market Act’s proposal for a decision by 2012 to ensure mutual recognition of e-identification and e-authentication across the EU and the revision in 2011 of the Directive on electronic signatures.

5. Helping SMEs grasp opportunities of a resource-efficient economy

Europe 2020 strategy shifted the focus to helping SMEs become key players in transition to resource-efficient growth. Whilst SMEs have some market incentives to optimise their resource use, they often face challenges of limited information, time, and human and financial resources which hamper the optimal use of these incentives.

To overcome these problems, the Commission will:

implement the new Energy Efficiency Plan and move towards an eco-innovation Action Plan, that pays special attention to SMEs in promoting networking, low carbon technologies and resource efficient innovation;

further develop the specific action on environmental and energy experts within the Enterprise Europe Network.

The Member States are invited to:

make better use of State Aid possibilities to support investment in the environment and energy fields ;

help SMEs acquire the necessary managerial and technical skills to adapt their business towards the low carbon, resource efficient economy, inter alia through the European Social Fund;

provide regulatory incentives to SMEs registered with the Eco-Management and Audit Scheme (EMAS) and with ISO 14.000 and take measures to encourage micro and small enterprises to take advantage of simplified EMAS-type schemes, such as “EMAS-EASY”.

6. Promoting entrepreneurship, job creation and inclusive growth

SMEs are the leading job creators in the EU. They provide two thirds of private sector jobs in the EU and will be pivotal in attaining the EU employment target of 75% by 2020. However, due to the economic crisis some 3.25 million jobs in SMEs have been lost, which further underlines the need to restore the job-creating capacity of SMEs.

To encourage entrepreneurs to start up and expandthe Commission will:

create mentoring schemes for female entrepreneurs in at least 10 EU countries to provide advice and support with the start up, functioning and growth of their enterprises;

identify best practices to support business transfers and launch a campaign to promote these practices;

adopt, by end 2011, a Social Business Initiative focusing on enterprises pursuing social objectives.

Member States are invited to:

reduce the time needed to get licences and permits (including environmental permits) to 1 month by the end of 2013;

promote second chances for entrepreneurs by limiting the discharge time and debt settlement for an honest entrepreneur after bankruptcy to a maximum of three years by 2013;

develop user-friendly and widely supported marketplaces and databases for transferrable businesses and provide training and support to increase the number of successful business transfers, including communication campaigns to raise awareness of the need for early preparation of business transfers.

Conclusion

To give new impetus to the SBA and to ensure a full and timely delivery of all its actions requires active support by, and the full cooperation of, all Member States, European institutions and stakeholders.

The Commission is determined to continue to give priority to SMEs and to take into account their specific characteristics in its proposals and programmes. Improving the awareness and visibility of actions with national and regional policy makers and other stakeholders will be instrumental in ensuring that the SBA is implemented close to entrepreneurs.

The SME Envoy will monitor the progress of the implementation of the SBA in close collaboration with the Member States. In addition, an SME Assembly will provide a new forum for regular interaction with SME representatives.

The Member States are invited to fully implement the updated SBA which will contribute towards delivering the key objectives of the Europe 2020 strategy. The European Parliament and the Council have a key role in keeping SMEs high on the political agenda and ensuring full support for the implementation of the SBA.